Demand — Paper 3 · IGCSE Economics 0455

1 (a) Explain what is meant by primary, secondary and tertiary sectors of production and identify which sectors are referred to in the extract. … … … … … … … … … … … … … … … … … … … … [5] (b) What does the extract mean when it says, ‘a decline in iron ore prices in real terms’? … … … … … … … … … … … … [3] (c) What evidence is there in the extract that the demand for steel from China was a large part of the market? … … … … … … … … [2] (d) Explain, using a demand and supply diagram, the change in the market price for iron ore between 2002 - 2007. … … … … … … [5] (e) Use the information in the extract to suggest what might happen to the price of steel in 2008. … … … … … … … … … … … … … … … … [4] (f) The extract says, ‘successful mining companies used these profits to buy rival competitors in order to cut costs and increase profits even further’. Discuss whether the purchase of another company might lead to lower costs and higher profit. … … … … … … … … … … … … … … … … … … … … … … … … … … … [7] [Total: 26] The extract ‘Reduced furniture prices help bring down inflation’ will be needed for this question.

26 marks

Mark scheme: 1 (a) 1 mark for definition of the primary sector: extraction and collection of raw materials. 1 mark for definition of the secondary sector: the processing of raw materials into semi- finished and finished goods. 1 mark for definition of the tertiary sector: the production of services. 1 mark for identifying the primary sector is referred to (mining). 1 mark for the secondary sector is referred to (manufacturing). [5] (b) 1 mark for stating that prices in real terms have been compared to the rate of inflation. 2 marks for recognising that either inflation was greater than the rise in iron ore prices or iron ore prices fell faster than the price level. [3] (c) 1 mark for the rise in the price of steel was mainly due to higher demand from China. 1 mark for the increase in demand for steel from China was equivalent to either the entire steel output of Germany and/or about half of the output from the United States each year. [2] (d) D1 S D price of P1 iron ore P D1 D S 0 Q Q1 quantity of iron ore 1 mark for labels. 1 mark for shift of demand curve to the right. 1 mark for equilibriums. 1 mark for an increase in demand will raise price. 1 mark for higher price will cause an extension/expansion in supply/increase in quantity supplied. [5] (e) 1 mark for price is expected to fall. 1 mark for the price of iron ore used to make steel is expected to decline/costs of production are expected to fall. 1 mark for price of rival metals is expected to fall. 1 mark for competitive pressure to lower price. 1 mark for recognising the effect is uncertain. 1 mark for large mining companies have market power to set price. 1 mark for demand may continue to rise. Note: maximum mark of 4. [4] IGCSE – October/November 2010 0455 31 (f) Up to 5 marks for considering why such a purchase may lower costs and increase profit: • recognition that whilst total cost may rise, average cost may fall • a larger company may be able to take greater advantage of economies of scale • explanation/examples of economies of scale • buying out a rival company raises market power • higher market power may enable a firm to raise price • lower average cost and higher price will increase profit. Up to 2 marks for why the purchase may not lower average costs and increase profit: • the company purchased may be loss-making • the new company formed may experience diseconomies of scale • examples/explanation of diseconomies of scale. Note: maximum mark of 7. [7]

This question in 0455/31 Oct/Nov 2010

1 (a) Give two possible causes of an increase in the supply of mobile phones. … … … … [2] (b) Using the information in the table, compare the ownership of mobile phones and computers in the three African countries with that in the three Western countries. … … … … … … … … … … … … … … … … [4] (c) Using a demand diagram in each case, illustrate the effect on the demand for mobile phones of: (i) a fall in the price of mobile phones [2] (ii) an increase in the awareness of the benefits of mobile phones. [2] (d) Explain how the use of mobile phones may reduce market failure in agricultural markets. … … … … … … … … … … … … [3] (e) Describe two characteristics of a private limited company such as Globacom. … … … … … … … … [2] (f) (i) Are corporate taxes direct or indirect taxes? Explain your answer. … … … … … … … … [2] (ii) Discuss whether imposing corporate taxes on the profits of mobile phone companies will discourage multi-national phone companies from setting up in a country. … … … … … … … … … … … … … … … … … … … … … … … … … … … … [7] [Total: 24] The extract ‘United States (US) unemployment reaches new heights’ will be needed for this question.

24 marks

Mark scheme: 1 (a) Two from: advances in technology, fall in costs of production, rise in labour productivity, government subsidies, fall in indirect taxation, entry of new firms, creation of joint ventures. [2] (b) Ownership of mobile phones is higher than computers in both areas (1). The gap between the ownership of mobile phones and computers in percentage terms was significantly higher in the African countries (1). Ownership of computers is significantly lower in the African countries than in the Western countries (1). Generally, ownership of mobile phones was higher per 100 population in Western countries (1) but it is interesting to note that ownership was higher per 100 population in South Africa than in the United States (1). Note: maximum mark is 4. [4] (c) (i) Price D of mobile phones P P1 D 0 Q Q1 Quantity of mobile phones 1 mark for labels. 1 mark for movement downwards along the demand curve. [2] (ii) Price D1 of mobile D phones D1 D 0 Quantity of mobile phones 1 mark for labels. 1 mark for shift of the demand curve to the right. [2] IGCSE – October/November 2010 0455 32 (d) Mobile phones help to bring buyers and sellers together/improve communication (1); this should reduce the risk of surpluses and shortages occurring/provides information about demand and supply (1); reduces risk of information failure (1); reduces travel time (1); helps producers to allocate resources according to consumer demand (1); so allow the markets to work efficiently (1). Note: maximum mark of 3. [3] (e) 1 mark for each of two characteristics e.g. has limited liability, can only sell shares to known individuals. [2] (f) (i) Direct taxes (1) as they are taxes on income/profit (1). [2] (ii) 1 mark for agreeing it may discourage. Up to 4 marks for explaining why it may discourage, e.g. reduce profits, reduce competitiveness. Up to 7 marks if acknowledge may discourage but then considers factors why it might not, e.g. corporate taxes may be lower, demand in the market may be increasing, there may be government subsidies, availability of cheap labour, high labour productivity, companies will compare market conditions in the country with other countries. [7]

This question in 0455/32 Oct/Nov 2010

1 (a) Draw a demand and supply diagram to show the effect of an increase in demand for gas on the world market for gas. [3] (b) Using information from the extract, explain why Gazprom’s share price may have fallen in 2009. … … … … … … … … … … … … [3] (c) (i) Give two reasons why a firm may borrow. … … … … [2] (ii) What effect might Gazprom’s spending on building new pipelines have on the company’s profits in the short term and long term? … … … … … … … … … … … … … … … … [4] (d) Why might the best engineers want to work for Gazprom? … … … … … … … … … … … … [3] (e) (i) Comment on how close Gazprom was to being a monopoly in 2008. … … … … … … … … … … … … [3] (ii) Discuss the information you would need in order to assess whether a monopoly is benefiting consumers. … … … … … … … … … … … … … … … … … … … … … … … … [6] [Total: 24] The extract ‘Information on Gross Domestic Product (GDP), Human Development Index (HDI), foreign aid and health expenditure in selected countries’ will be needed for this question.

24 marks

Mark scheme: 1 (a) D1 D S Price of gas P1 P D1 S D 0 Q Q1 Quantity of gas 1 mark for labels. 1 mark for a shift to the right of the demand curve. 1 mark for equilibriums. [3] (b) Recognition that demand for shares may have fallen (1). Explanation that lower demand may have been due to a cut in dividend paid (1). Recognition that demand for gas was expected to fall in the future (1), which may reduce profit and so Gazprom’s ability to pay high dividends in the future (1). Explanation that Gazprom may have issued more shares (1) to finance expansion (1). Recognition that share prices in general may have fallen (1) because of the global downturn (1). Recognition that lower demand may have been due to Gazprom’s debts (1), as greater debts would mean less to pay shareholders (1). Recognition that higher supply may reduce prices (1) and if demand is inelastic may lower revenue (1). Note: maximum mark is 3. [3] (c) (i) 1 mark for each of the two valid reasons, e.g. to finance investment expenditure, to finance the take-over of another firm, to cover shortfall in revenue, to finance running costs, to finance research and development. [2] (ii) Up to 2 marks for examining the effect in the short term. It is likely to reduce profits (1) as costs will rise (1). Up to 2 marks for examining the effect in long term. Explanation of why it might fall/explanation of why it might rise (1). Position more uncertain/may go either way (1). [4] (d) Reasons may include high pay, good working conditions, opportunity to use the latest technology, status of working for the largest gas company, opportunity to work with other top engineers, Gazprom is intending to expand so promotion chances may be increasing. Up to 3 marks for one reason well explained. 2 marks for one reason reasonably well explained. 1 mark for each of the three reasons identified. [3] IGCSE – October/November 2010 0455 33 (e) (i) Defining monopoly (1). Clear judgement on position in Russia (1). Clear judgement on position in Europe (1). No information given on share of sales in other parts of the world so judgement cannot be made on world market share (1). Recognition that a monopoly can be defined in more than one way (1). [3] (ii) Consumers may be disadvantaged as a result of high prices, poor quality, lack of choice and lack of innovation. On the other hand, they may benefit from low prices due to low costs arising from economies of scale, reliability of supply, large profits may lead to more spending on research and development, which can lead to more innovation and better quality. Candidates should consider what needs to be assessed, e.g. how prices, costs, range of products, profit and innovation might compare with a more competitive situation. Up to 4 marks for one-sided view. Up to 6 marks for two-sided view. [6]

This question in 0455/33 Oct/Nov 2010

1 (a) What is meant by a finite resource? … … … … … … … … [2] (b) Explain, using a demand and supply diagram, the effect of setting the price of water too low. … … … … … … … … [4] (c) (i) Define opportunity cost. … … … … … … … … [2] (ii) Using the extract, calculate the opportunity cost in terms of wheat of using the water needed to produce one kilogram of beef. … … [1] (d) Explain two possible reasons why the world’s demand for water may not grow as rapidly as the extract suggests. … … … … … … … … … … … … … … … … [4] (e) Discuss the arguments for and against taxing household use of water. … … … … … … … … … … … … … … … … … … … … … … … … … … … … [7] [Total: 20] The extract ‘Economic challenges facing Brazil’ will be needed for this question.

20 marks

Mark scheme: 1 (a) A factor of production/input (1) that is limited in supply/scarce (1). Note: Do not reward examples. [2] (b) D Price S of water P D S 0 QS QD Quantity of water 1 mark for correct labels (D, S, P and Q). 1 mark for price being set below the equilibrium level. 1 mark for stating or showing that demand will exceed supply. 1 mark for supply will fall and demand will rise. 1 mark for explaining that there will be a shortage of water or clearly showing this on the diagram. Note: maximum mark of 4. [4] (c) (i) Best alternative/next best alternative (1) foregone/example bringing out the meaning of foregone (1). [2] (ii) 16 kilograms of wheat. [1] (d) 1 mark for each of two possible reasons identified, such as: • world population may not increase as much as predicted • agriculture/manufacturing may become more efficient • vegetarianism may increase • global warming may not continue • global incomes may fall • tax on water may be introduced by a number of countries • government campaigns to encourage households to save water. 1 mark for each of two possible explanations, such as: • If growth of the world population is less than predicted, the demand for water in general will increase less. • If agriculture becomes more efficient, less water will be needed for each kilogram of food produced. • A rise in vegetarianism will reduce the demand for meat which uses a lot of water to produce it. • If global warming does not continue, there will be fewer droughts and floods. • A fall in global incomes will be likely to reduce the demand for water and the products which use water to produce them. [4] IGCSE – May/June 2011 0455 31 (e) Arguments for taxing household use of water, such as: • may move price to the equilibrium level • would ration a scarce resource • would encourage people not to waste water • would raise revenue. Arguments against taxing household use of water, such as: • difficult to know where to set the tax • the tax will be regressive • the rich may prove unresponsive to the price rise • the tax may cause health problems • agriculture and manufacturing use more water. Up to 5 marks for a one-sided approach. Maximum of 4 marks for a list. [7] $

This question in 0455/31 May/June 2011

2 (a) Identify, from the extract, two influences on the demand for tea. … … … … … … … … [2] (b) (i) Explain what is likely to have happened to the price of Kenyan tea in 2009. … … … … … … … … [2] (ii) Explain what is likely to have happened to the price of Kenyan tea in 2010. … … … … … … … … [2] (c) Using information from the extract, explain two reasons why Kenyan tea pickers may want to switch to other jobs. … … … … … … … … … … … … … … … … [4] (d) Why is there a high average cost of producing tea in Kenya? … … … … … … … … … … … … … … … … [4] (e) Discuss whether giving a subsidy to Kenyan tea farmers would be likely to increase sales of Kenyan tea to Pakistan. … … … … … … … … …

14 marks

Mark scheme: 2 (a) 1 mark for each of two influences from price, quality and tastes. [2] (b) (i) 1 mark for price is likely to have increased. 1 mark for because supply decreased/tea became more scarce/idea of lower supply. (Accept a diagrammatic approach.) [2] (ii) 1 mark for price is likely to have fallen. 1 mark for because supply increased/oversupply/idea of higher supply. (Accept a diagrammatic approach.) [2] (c) 1 mark for each of two reasons identified e.g. • risk of unemployment • disruption to income/earnings • low wages/fluctuations in wages • hard physical job/poor working conditions • fear of change due to possible movement towards more capital intensive methods • fear of change due to increasing competition from other tea-producing countries. 1 mark for each of two explanations e.g. • Tea pickers may want greater stability/security of employment or income/suffer from greater fluctuations in employment or income/experience seasonal unemployment. • Tea pickers may be attracted by higher wages in other jobs/explanation of why wages are low in tea picking explanation that low wages result in low living standards. • Tea picking may have to be undertaken in bad weather conditions or with little capital equipment to help/working conditions may be more favourable in other jobs. • Workers may lack the skills to adapt to new methods of production/skills required in other jobs are not changing, or new methods of production may result in unemployment. Note that the explanation marks may be gained either by explaining why the reason identified occurs (e.g. fluctuations in output, increasing competition from tea producers in other countries, falling demand for Kenyan tea) or why other jobs would be more attractive. [4] IGCSE – May/June 2012 0455 31 (d) 1 mark for small scale of production. 1 mark for little use of capital equipment/labour-intensive method of production. 1 mark for inability to spread fixed cost over a high output/high average fixed cost. 1 mark for increasing output may increase efficiency or productivity/low-scale output is inefficient/labour intensive production may be inefficient/capital intensive production may be efficient. 1 mark for inability to take advantage of economies of scale. Up to 2 marks for describing the types of economies of scale that larger tea producers could experience. [4] (e) Why it might increase sales, e.g. it may • increase supply • lower price • or award up to 2 marks for the above points if shown in a relevant diagram • reduce costs of production • make Kenyan tea more price competitive • make Kenyan tea farmers more efficient • allow Kenyan tea farmers to benefit from economies of scale • provide funds for reinvestment • improve quality. Why it might not increase sales, e.g. • price may not fall below rivals • a recession may occur in Pakistan • import restrictions may be imposed by Pakistan • taste/quality may still favour other countries • there is a risk that Kenyan tea farmers will become reliant on the subsidy and so become inefficient • other factors may influence supply e.g. weather conditions may prevent supply increasing • other tea-producing countries may also subsidise tea production. Maximum of 4 marks for a one sided approach. Maximum of 3 for a list or list-like approach. [6]

This question in 0455/31 May/June 2012

1 (a) What is meant by external costs? … … … … … … … … [2] (b) What evidence is there in the extract of the economic problem? … … … … … … … … [2] (c) Why may obesity lead to an increase in government spending? … … … … … … … … [2] (d) (i) Does the extract suggest that the poor spend more on food than the rich? Explain your answer. … … … … … … … … … … … … [3] (ii) Does the extract suggest that the demand for cigarettes is price elastic or price inelastic? Explain your answer. … … … … … … … … … … … … [3] (e) Discuss whether the US Government should tax chocolate. … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] [Total: 20] The extract ‘Challenges facing the BRICs’ will be needed for this question.

20 marks

Mark scheme: 1 (a) 2 marks for costs which have a harmful effect on third parties/those not involved with producing or consuming the product. 2 marks for social costs minus private costs. 1 mark for harmful effects (credit an appropriate example such as pollution). Do not credit just repetition of ‘costs’. 1 mark for identifying those affected, i.e. third parties/others/those not involved with producing or consuming the product (credit an appropriate example such as those living near a polluting factory). Note: No marks for general comment referring to the impact on people/society/community (confusion with social costs). [2] (b) 1 mark for demand for health care is exceeding the resources available to supply it. 1 mark for this indicates that wants exceed resources/there is a problem of scarcity or defining the economic problem. 1 mark for dealing with health problems caused by obesity prevents other health problems being treated. [2] (c) 1 mark for it may increase government spending on health care because of the health problems it creates. 1 mark for it may increase government spending on sickness benefits because people may be unable to work or may be off sick. 1 mark for may increase government spending on health campaigns/advertising, healthy eating and/or exercise. 1 mark for government spending on subsidising low fat food. [2] (d) (i) 1 mark for the extract mentions that the poor spend a higher proportion on food. 1 mark for this does not necessarily mean they spend more in total. 1 mark for the poor may actually spend less because their income is lower. [3] (ii) 1 mark for inelastic demand. 1 mark for the extract mentions that smoking is addictive/raising tax on cigarettes has not proved effective. 1 mark for the quantity of cigarettes demanded is likely to change by less than the change in price/defining inelastic demand. [3] IGCSE – May/June 2012 0455 32 (e) Why it should, e.g. it may • raise revenue • reduce obesity • reduce the consumption of chocolate • reduce the external costs associated with obesity (diagram may be used). Why it should not, e.g. • likely to be a regressive tax • eating high fat foods is not the only cause of obesity • the poor may not have easy access to healthy foods • may just switch to other high fat foods • demand may be inelastic • may reduce employment in the chocolate industry • may reduce GDP. Up to 2 marks for discussing why another policy may be more effective. Maximum of 4 marks for a list or list-like approach. Maximum of 5 marks for a one-sided discussion. [8]

This question in 0455/32 May/June 2012

1 (a) What is meant by external costs? … … … … … … … … [2] (b) What evidence is there in the extract of the economic problem? … … … … … … … … [2] (c) Why may obesity lead to an increase in government spending? … … … … … … … … [2] (d) (i) Does the extract suggest that the poor spend more on food than the rich? Explain your answer. … … … … … … … … … … … … [3] (ii) Does the extract suggest that the demand for cigarettes is price elastic or price inelastic? Explain your answer. … … … … … … … … … … … … [3] (e) Discuss whether the US Government should tax chocolate. … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … … [8] [Total: 20] The extract ‘Challenges facing the BRICs’ will be needed for this question.

20 marks

Mark scheme: 1 (a) 2 marks for costs which have a harmful effect on third parties/those not involved with producing or consuming the product. 2 marks for social costs minus private costs. 1 mark for harmful effects (credit an appropriate example such as pollution). Do not credit just repetition of ‘costs’. 1 mark for identifying those affected, i.e. third parties/others/those not involved with producing or consuming the product (credit an appropriate example such as those living near a polluting factory). Note: No marks for general comment referring to the impact on people/society/community (confusion with social costs). [2] (b) 1 mark for demand for health care is exceeding the resources available to supply it. 1 mark for this indicates that wants exceed resources/there is a problem of scarcity or defining the economic problem. 1 mark for dealing with health problems caused by obesity prevents other health problems being treated. [2] (c) 1 mark for it may increase government spending on health care because of the health problems it creates. 1 mark for it may increase government spending on sickness benefits because people may be unable to work or may be off sick. 1 mark for may increase government spending on health campaigns/advertising, healthy eating and/or exercise. 1 mark for government spending on subsidising low fat food. [2] (d) (i) 1 mark for the extract mentions that the poor spend a higher proportion on food. 1 mark for this does not necessarily mean they spend more in total. 1 mark for the poor may actually spend less because their income is lower. [3] (ii) 1 mark for inelastic demand. 1 mark for the extract mentions that smoking is addictive/raising tax on cigarettes has not proved effective. 1 mark for the quantity of cigarettes demanded is likely to change by less than the change in price/defining inelastic demand. [3] IGCSE – May/June 2012 0455 33 (e) Why it should, e.g. it may • raise revenue • reduce obesity • reduce the consumption of chocolate • reduce the external costs associated with obesity (diagram may be used). Why it should not, e.g. • likely to be a regressive tax • eating high fat foods is not the only cause of obesity • the poor may not have easy access to healthy foods • may just switch to other high fat foods • demand may be inelastic • may reduce employment in the chocolate industry • may reduce GDP. Up to 2 marks for discussing why another policy may be more effective. Maximum of 4 marks for a list or list-like approach. Maximum of 5 marks for a one-sided discussion. [8]

This question in 0455/33 May/June 2012

2 (a) Identify two variable costs for hotel owners mentioned in the extract. … … … … … … … … [2] (b) What does the price elasticity of demand of (–) 1.5 for hotel accommodation mean? … … … … … … … … … … … … … … … … [4] (c) Explain two reasons for the increase in the demand for tickets on Emirates Airline. … … … … … … … … … … … … … … … … [4] (d) What evidence is there in the extract that the airline industry is not operating under conditions of perfect competition? … … … … … … … … … … … … … … … … [4] (e) Discuss whether the merger between United Airlines and Continental Airlines would benefit air passengers. … … … … … … … … … … … … … … … … … … … … … … … … [6] [Total: 20]

20 marks

This question in 0455/32 Oct/Nov 2012

1 (a) Identify two disadvantages of small scale production referred to in the extract. … … … … … … … … [2] (b) Using information from the extract, explain two reasons why the price of rubber increased in 2011. … … … … … … … … … … … … … … … … [4] (c) Explain two functions of money referred to in the extract. … … … … … … … … … … … … … … … … [4] (d) Using information from the extract, explain two reasons why demand for rubber from Thailand may decrease in the future. … … … … … … … … … … … … … … … … [4] (e) Discuss what factors will influence whether people will want to work for a large rubber producing firm. … … … … … … … … … … … … … … … … … … … … … … … … [6] [Total: 20] The extract ‘Cuba moves towards a market economy’ will be needed for this question.

20 marks

Mark scheme: 1 (a) 1 mark for lack of capital. 1 mark for inability to take advantage of economies of scale/high average costs. [2] (b) 1 mark each for each of 2 reasons identified i.e. decrease in supply and increase in demand. 1 mark each for each of 2 explanations i.e. supply decreased due to bad weather, demand increased due to increasing global demand for tyres. [4] (c) 1 mark for identifying a standard for deferred payment with: 1 mark for explaining that is money is being used to borrow and to repay. 1 mark for identifying a store of value with: 1 mark for explaining that people are saving money. 1 mark for identifying unit of account (measure of value)/medium of exchange with: 1 mark for referring to prices/buying or selling. [4] (d) 1 mark for identifying increased competition from larger Chinese plantations. 1 mark for explaining these Chinese plantations may produce rubber more cheaply. 1 mark for identifying the quantity of synthetic rubber may rise. 1 mark for explaining synthetic and natural rubber are substitutes/people may switch from buying natural rubber to buying synthetic rubber. 1 mark for identifying bad weather may continue. 1 mark for explaining lower supply will raise price which will reduce demand. [4] (e) Up to 3 marks for identifying factors e.g. • wage rate • holidays • promotion chances • job security • job satisfaction • location. Up to 4 marks for discussing factors e.g. more people will want to work for a large rubber firm if: • the wage rate is high • there are long holidays • promotion chances are good • there is a high level of job security • a high level of job satisfaction • the firm is close to where people live. Note: up to three marks for any one point identified and discussed. Up to three marks for a list-like approach. Note: a maximum mark of 6. [6] IGCSE – May/June 2013 0455 33

This question in 0455/33 May/June 2013

1 (a) (i) Define profit. … … … … … … … … [2] (ii) Using information from the extract, explain two reasons why Chinese car producers think the production of electronic cars will be profitable. … … … … … … … … … … … … … … … [4] (b) Using a demand and supply diagram, explain why car sales fell in the USA in 2009. … … … … … … … … … … … … … … … … [4] (c) Calculate the percentage of the USA’s labour force employed, directly and indirectly, in the car industry in 2009. … … … … … … … … [2] (d) Identify two ways consumers may benefit from a competitive market. … … … … … … … … [2] (e) Discuss whether a merger of car companies would benefit consumers. … … … … … … … … … … … … … … … … … … … … … … … … [6] [Total: 20] The extract ‘A brighter future for Nigeria?’ will be needed for this question.

20 marks

Mark scheme: 1 (a) (i) Define profit. [2] 2 marks for the positive difference between revenue and cost. 1 mark for idea of reward or payment to entrepreneur/enterprise/risk taker. 1 mark for revenue minus cost. (ii) Using information from the extract, explain two reasons why Chinese car producers think the production of electronic cars will be profitable. [4] 1 mark for identification and 1 mark for explanation of 2 reasons: 1 mark for identifying higher petrol prices. 1 mark for explaining higher petrol prices will increase demand for electronic cars. 1 mark for identifying advances in the technology of producing electronic cars. 1 mark for explaining advances in the technology will reduce costs of production/ increase demand due to higher quality of cars produced. 1 mark for identifying government support. 1 mark for grants/subsidies will reduce costs of production. (b) Using a demand and supply diagram, explain why car sales fell in the USA in 2009. [4] Price D of S Cars D1 P P1 S D1 D 0 Q1 Q Quantity of Cars 1 mark for correct axes – P, Q, D and S. 1 mark for a shift in the demand curve to the left. 1 mark original and new equilibriums. 1 mark for explaining that the fall in demand resulted from a slowdown in the US economy. (c) Calculate the percentage of the USA’s labour force employed, directly and indirectly, in the car industry in 2009. [2] 2 marks for 6.5%/6.49%/1.95% (directly) and 4.55% (indirectly). 1 mark for correct working i.e. 10m/154m × 100/1.95% or 4.55%. IGCSE – October/November 2013 0455 33 (d) Identify two ways consumers benefit from a competitive market. [2] 1 mark for each of 2 relevant benefits identified e.g. low prices, high quality, greater choice, ready availability, innovation. (e) Discuss whether a merger of car companies would benefit consumers. [6] Up to 4 marks for discussing why it might: • greater advantage taken of economies of scale (1) example/s of economies of scale (1) leading to lower average costs (1) and so possibly lower prices (1) • more money being spent on research and development (1) resulting in both lower prices (1) and better quality (1). Up to 4 marks for discussing why it might not: • greater abuse of market power (1) moving closer to a monopoly (1) greater power to raise price (1) restrict supply (1) lower quality (1) less variety of products (1) • diseconomies of scale (1) example/s of diseconomies (1) leading to higher average costs (1) and so possibly higher prices (1). Note: a maximum mark of 5 marks if there is no reference to consumers e.g. in terms of prices, quality and variety. IGCSE – October/November 2013 0455 33

This question in 0455/33 Oct/Nov 2013